2007 February 11 Sunday
Biggest H1B Visa Use: Outsourcing To India

A program whose stated purpose is to bring people with rare skills to work in America has become a program that helps ship jobs abroad.

But a review of new information from the federal government suggests that the companies benefiting most from the temporary worker program aren't U.S. companies at all. Rather, they appear to be Indian outsourcing firms, which often hire workers from India to train in the U.S. before returning home to work. Data for the fiscal year 2006, which ended last September, show that 7 of the top 10 applicants for H-1B visas are Indian companies. Giants Infosys Technologies (INFY) and Wipro (WIT) took the top two spots, with 22,600 and 19,400 applications, respectively. The company with the third most applications is Cognizant Technology Solutions (CTSH), which is based in Teaneck, N.J., but has most of its operations in India. All three companies provide services to U.S. companies from India, including technology support and back-office processing.

The only other U.S. companies among the top 10 are the accounting and consulting firm Deloitte & Touche and consultancy Accenture (ACN). They rank seventh and ninth, with 8,000 and 7,000 applications, respectively.

I suspect one reason why the US companies aren't such big H1B users is that they are simply starting more IT projects abroad.

This brings up questions that some big US tech companies would rather not hear asked.

The dominance of Indian outsourcing companies raises public policy questions about the temporary visa program. Some experts say that while the intent of H-1B visas may be to help U.S. companies hire workers with rare skills, the effect in some cases may be to facilitate moving jobs abroad.

A coalition of US companies wants to double the number of H-1B visas issued each year. My guess is this data will make it harder for them to push for their goal. Expansion of a ship-jobs-abroad program is a harder sell in Congress. Though big money talks loud enough that I can't say it is an impossible sell.

Share |      By Randall Parker at 2007 February 11 12:06 AM  Economics Labor

John S Bolton said at February 11, 2007 12:46 AM:

Technology transfer of this magnitude has a traitorous quality to it.
The net taxpayer has enormous investment in the education expenses
which allow for there to be something to transfer.
Advocates for the one-worlder, disloyalistic companies of today,
will say but it's theirs to transfer.
If they ask for visas for all these midlevel tech. transfer agents, the people have a say as to whether their investment in education and research is to made more open to espionage.
Recall that politicians and media etc. tell us that we can expect to gain the reward
for such expenditures by the net taxpayers.

Jerry Martinson said at February 11, 2007 10:29 AM:

I know this is all anecdotal but I don't think there's any statistical, scientific study of this phenomena that seems to really capture what is going on in a way that's relevant for policy makers.

I've worked for several companies that use lots of H1-B's and "outsource" quite a bit. The high-tech outsourcing panic of the past few years has been way overblown in the popular press (i.e. Lou Dobbs). I hear anecdotes that the popular press has changed US attitudes so much that colleges and universities are having even more difficulty getting US students to enroll in engineering and computer science. It has even affected faculty if the DesignCon2007 address from Purdue's dean of engineering is an accurate reflection. Consider that despite a _severe_ recession from the dramatic overivestment in the internet sector in 1998-2001, that wages in this area have started increasing substantially again and new college hires are getting snapped up. Things don't seem a whole lot different between the 1989-1993 engineering jobs recession and the 2002-2004 engineering jobs recession except that during the 1989-1993 mass media pointed to the cold-war end (i.e. the movie "Falling Down") and 2002-2004 engineering jobs recession we could all watch Lou Dobbs and Tom Friedman point to India.

Some of the dramatic "outsourcing" where clearly US jobs have been replaced has been from high-tech startups that go into "hibernation". In the rare cases that these start-ups hibernations are successful and they re-awaken, there's usually plenty of US hiring that goes on. I personally know of at least 3 cases where if these companies couldn't outsource, those companies would be dead and they now employ around 1000 US engineers. As far as depression of US wages go, the 7-8 year working experience level of wages in Bangalore is now about 60% of US Silicon Valley. That's not a whole lot lower than Austin TX, where it is about 75% of US Silicon Valley. New college hires are substantially lower but the wages there are going up - I think this proves that there's a limit to the amount of skilled labor in the world.

I still see a large progression of H1-B visas to PRs/Citizens continuing. This is the dominant diver of non-Mexican immigration in Silicon Valley. The only thing that's different now is the reduced cost of telecommunications has allowed Bangalore and other places to finally achieve a "critical mass" of industry. This now enables Indian nationals to go back to reasonable if they so choose. The ones I am friends with seem to be very mixed about this. They like the idea of re-uniting with family but then they say they now have lives here with kids in school, mortgages, etc...

Another phenomena that is occurring is that when you start an outsourcing operation, you can get a couple of the employees to work in the US for a short while (I think 3 to 6 months) before returning back to India.

I think the real question that US engineers need to have answered is whether this is all a zero-sum game. That's what Lou Dobbs seems to think. However, again I've seen business value created in several cases by "outsourcing" to India that resulted in more employment in both US and India.

dougjnn said at February 12, 2007 2:28 PM:

My comment concerns globalization and free trade generally, rather than this particular HIB Visa issue.

It seems likely to me that in the current American circumstances continued current low levels of barriers to free international trade are tending to quite strongly increase income disparity in this country. The great bulk of the economics profession may be right that the long term effect of freer trade is increased wealth for ALL participating country GDPís through beneficial specialization in the mix of things that respective countries are best at. All economists also acknowledged that there are some American losers in free trade, but most claim that the overall winers win more than the losers lose (and that we could cushion these loses internally, etc.).

What seems likely to me is that systemically in current circumstances that most of the winnings of increased American free trade go to the very top of our income scale Ė the upper and upper middle class, and upper class owners of lots of capital or at fulcrum positions (e.g. on Wall Street) in our financial system. And most of the losers come from our middle middle class. In short hand, Hollywood, Wall Street, Silicon Valley and upper level software people are winners (and GE etc.), while not only factor workers but also many middle and lower level office workers are losers. Only weakly restricted immigration especially given the wink given to illegals hurts our citizen lower middle class (working people) significantly. And ups everyoneís housing costs Ė though older workers have had a nice equity ride, at the expense of their childrenís current and future standard of living.

So these two open borders policies are squeezing the middle class quite badly I think. Probably more than anything else, though medical cost inflation contributes strongly as well.

We should set macro economic policy by what is best for the largest number, for our middle class, for our voters irrespective of our political contributors and punditry, it seems to me, rather than what makes the nation as a whole even richer, when those benefits are so skewed. Except for the ability to fund our military and a few other things, money is an individual not a national good. Note none of this is about leveling or massive redistribution schemes. Itís not about incentive sapping confiscatory tax levels. Itís about slowing or stopping or even reversing the growing chasm of income disparity by macro economic policy.

Jack Reacher said at March 27, 2009 7:27 AM:

My former company, in Parsipanny, Northern NJ, used Cognizant and is now fazing them out. They have also been very big into H1B visas and pay a lot of those developers over $110K a year for simple Oracle forms development. This week, they just laid off almost all of the American Developers (all over 40). Not one Indian was let go. In this case, Indian developers can work short days and the (all Amercan trio) of Managers have no idea how to get a grip.

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